Dear ARB,
I believe there are 3 major issues that the ARB either has misconceived ideas about or that have not been brought to their attention.
#1The facts are that exactly the same as the automotive industry, the diesel
industry has long been striving to increase the life expectancy of their
Products. In the last 20 years, the average life expectancy has doubled for diesel fired equipment. But, in contrast to the automotive industry, the diesel technology has long been one of refurbishing engines as most diesel fired engines have wet (replaceable) sleeves. Because the overall replacement cost of a single piece of heavy equipment can stretch into the hundreds of thousands of dollars. This allows the engine to be rebuilt an infinite amount of times over the life of the entire machine and further increases the longevity of the equipment overall. New technology continues to lengthen the life expectancy of all consumer products and diesel powered equipment is no different. Engines built in the mid 90’s have a life expectancy of 10,000 – 15,000 hours. The life expectancy of stationary and portable engines is even longer as most of them run at a constant RPM under a constant load. Now the math; Tier 0 built in 1996 @ an average of 1000 hours per year equates to 10,000 hours in 2006 or 15,000 hours in 2011 and even longer for stationary and portable engines. Stationary and portable engines can be and have been rebuilt numerous times and can reach life cycles of 20,000 to 40,000 hrs. The fact of an increased life cycle has been proven by the automotive industry and it holds true in the diesel industry. In the mid 70’s an American automobile with 100,000 miles was considered to be worn out by most standards, but by the early 90’s the American auto maker had made vast improvements in technology to the point that an American automobile with 100,000 miles became the norm for a good used automobile.
#2 The true financial impact of the current PERP and Off Highway Regulation will be much more devastating to both the construction industry and the state economic stability than the state is predicting. Contractors that base their business decisions on fleet turn over will be forced to move up that turnover schedule which will drive up costs significantly and for some, drive them out of business as we are talking about replacing assets that can have costs from $50,000.00 to $500,000.00 each or more. This is not like replacing that old 1970 Chevy pickup with a new 2007 Chevy pickup it’s more like replacing a fleet of those old Chevy pickups every year. Could you (or anyone) afford to replace your automobile every year and if you could, does that make good business sense? California contractors base their borrowing power on their asset base and every banker in the US knows this. Both of these regulations (as written) will have a significant negative impact on the contractors net worth, borrowing power, bonding capabilities and ability to bid competitively. This alone in many cases will force the small owner operator out of business either from the lack of funding from a loss in asset net worth or the inability to come up with the cash capital required to fund a job. This will narrow the scope of contractors with the ability to bid work and thus drive up overall costs and not just in the private sector. The municipalities that are already feeling the economic pinch will suffer with the rest. Driving up costs will slow the economy, which equates to a loss in revenues for not just the counties and cities, but also the state. Gov. Schwarzenegger was wrong in his statement at the World Environmental Conference that the California economy is still growing. Housing starts in California in the past 2 months have slowed and with the continued business exodus from California over numerous issues, the California job market continues to be a challenge. A slowing housing market, slowing economy and a regulation that will devastate the net worth of contractors virtually over night has the potential to be an economic disaster. Driving contractors out of business and slowing the economy will achieve the states overall goal of lowering the amount of particulates in the air in California, but it will also dramatically lower the much needed California tax base. The only logical solution would be to re-evaluate the Tier 0, Tier 1 replacement schedule, allow technology to be developed that is both reasonably priced and that achieves the desired out come with in a reasonable time frame that will have a moderate affect on the California economy. Allowing a one time retrofit/repower to low tiered equipment with a re-evaluation of the life expectancy will help to achieve this goal. These are but a couple of ideas that would help to ease the financial impact on both the contractor and the state while still achieving the states long term goal. I realize that the EPA has set goals to be achieved with in a set time frame or there are financial consequences to our federal funding, but Bankrupting local business and municipalities for the sake of federal funding is much like cutting off your nose despite your face. I am all for getting as much financial help as possible from the feds, but not at the cost of driving California into an economic recession. In a recession no one wins!!
#3We have the opportunity to set a global precedence and become the standard for a worldwide guideline. The goal is to not just clean up California air but also the air in all of North America. It is time that we as a state begin to learn from the mistakes made by the environmentalists and legislators to the logging and aggregate industries. Their restrictions have only forced large companies to move elsewhere. The rain forest is being devastated because of their actions and a large amount of rock now comes from quarries in Canada (which doubles the amount fuel consumption required to bring that same product into the U.S. through diesel powered transportation) due to these oversights in our legislation. While I agree we have a responsibility to clean up California’s air quality, we must also be smart about the actions we take for they can be devastating to local industries as well our neighbors to the North and South of us. This can only be accomplished by the proper implementation of a “Clean up Program” rather than a “Replacement Program”. After all, moving the problem-causing equipment from our backyard to a neighboring state, Mexico or Canada’s backyard does not really solve the problem, it only moves it. If Gov. Schwarzenegger is truly concerned with a global solution as he says he is, then the responsible thing to do would be to not throw our trash into our neighbors’ yard. This can be accomplished by making Tier 0 and Tier 1 engines cleaner burning before requiring them to be retired from the fleets or U.S. markets. This would also help with items #1 and #2. Requiring retirement of Tier 0 and Tier 1 will force contractors to sell equipment out of state in beginning implementation years, therefore having an adverse affect on our neighboring states economies as well as our own. When our neighboring states pass comparable regulatory actions, contractor will be forced to ship equipment out of the country in an effort to recoup some of their dwindling asset value and to help offset the high costs of replacement equipment.
As I have said, let’s learn form our previous mistakes and make this regulation a true world wide solution rather than only a solution for California that creates a problem for our neighboring states, Mexico and Canada.
In the past there have been tax incentive programs that would aid in the acquisition of new equipment to help spur the economy. These incentives have a tendency to motivate owners to make purchases that they would not normally make. What better way to spur the economy, take Tier 0 and Tier 1 engines out of service and aid the state in meeting EPA requirements? Tax credits and financial incentives towards new equipment purchases and retro fit/repowers would allow contractors to obtain up to date equipment and assist in the overwhelming financial burden of compliance on a consistent basis while continuing to contribute to the state tax base. Couple a tax incentive program with a revised retirement schedule for Tier 0 and Tier 1 engines and the state now has a workable program that will lessen the initial financial impact to the contractor while achieving the states long term goals.
In my opinion, it is better that the state and federal governments take a little less in tax revenues on the front side rather than suffer the potential losses in revenues due to a drop in the tax base or down turn in the economic status of one of the countries largest state economies. The ripple affect of our actions will be felt not just across our country but eventually in all of North America and we must be prepared to accept the responsibility of our actions for they may have devastating consequences.
In closing, it is not the regulation that is to be feared, rather the backlash to our economic stability.
Thank You
Steve McDonald
Service Manager
Pape’ Machinery
Rohnert Park, CA